Archive for September, 2010
Experts will continue to go back and forth about the length of the downturn, whether we've hit bottom yet and how long it will take to return to pre-crash property values. The answers the experts return are bound to be fairly well distributed up and down the spectrum of possibility. I'll probably side with those who use prediction methodologies that I find useful.
Having spent a fair amount of time at engineering school, I learned that the methodology employed can be almost as important as the results returned in a study. In every case, they add weight to the findings, though in most cases this is a subjective measure. Knowing what methods were used to come up with answers often tell us how much faith we can place — or in engineering parlance — how much precision there is in the results.
For instance, whenever I hear an economist put the current economic environment in terms of a theory that was used by advisors to a president who served in the last century, I tend to discount the findings. I'm not suggesting that I fully understand the math underlying the models that sprang from these theories. I'm just saying that I've been living in the aftermath of their use for the last three or four years and have lost faith in them.
No, if I'm going to buy into a forecast on the end of the downturn, I'm going to base it on something a bit more…human. When I see an industry's top players shifting position, it tells me something about the state of the industry and its most likely future states.
When an industry is overwhelmed by fear, uncertainty and doubt, as ours is whenever we experience a downturn, its players will either exit the business or hunker down to weather the storm. The decision to stay or go most often depends on the likelihood of continued employment at the current position, as well as the likelihood of advancement as the company exits the downturn. In any event, those that choose to stay in an industry are likely to be the most professional, the best trained, and the most successful, i.e. those that have invested the most in being successful here. Some successful players always leave as they have reason to believe they'll succeed elsewhere, but those who have achieved only moderate success are much more likely to exit the industry during a downturn. At least that's the way it always seems to work here.
During this most recent downturn, thousands of mortgage brokers, bankers, title and settlement agents, and residential appraisers left the business. Those that stayed hunkered down and either cut costs or engaged in innovation in anticipation of the recovery. Lately, I've seen a bit more movement among industry players I consider leaders. It's a little early in the game to take out my forecasting hat, but I'm watching carefully to see who is coming out of hibernation to pursue new opportunities.
If you're looking for a good indicator of the end of the downturn, start paying attention to who is moving into new positions of leadership. When that starts to happen, things are about to get lively again. I'm beginning to believe that this might be coming sooner rather than later.
Rick Grant is veteran journalist covering mortgage technology and the financial industry.
Follow him on Twitter: @NYRickGrant
A deal between Equity Residential and Friedkin Realty Group is in the works, according to an unidentified industry source. The source, who is not involved in the deal, says that San Francisco-based Friedkin Realty Group is selling its Northpark Apartments building located in Burlingame, CA to Equity Residential for $110 million.
Dozens of real estate investment trusts pay dividends to their shareholders, but it takes a special breed to consistently raise that payout year after year.
There are 14 REITs that increased their dividends every year for the last 10 years.
The jobless rate was little changed in most of the country in August, the Labor Department said. Twenty-seven states recorded unemployment rate increases from the previous month, 13 states registered rate decreases, and 10 states and the District of Columbia had no rate change.
J.P. Morgan Chase & Co. has taken an early lead in the race among big banks to revive the business of originating and bundling commercial mortgages into bonds.
Banks including J.P. Morgan, Wells Fargo & Co., Bank of America Corp. and Morgan Stanley are ramping up—and in some cases, rebuilding—their commercial-mortgage-backed securities, or CMBS, operations, as investors world-wide increasingly look outside U.S. government bonds for returns. Millions of dollars of fees are on the line, but risks remain with an enormous amount of uncertainty hanging over both the economy and the performance of office buildings, stores, hotels and other commercial real estate.
Wall Street is expected to sell about $10 billion of CMBS this year. That amount pales next to $230 billion of CMBS issuance in 2007, the record year for the market, according to data provider Dealogic. But it still amounts to a sharp turnaround from the past two years, when new deals came to a virtual halt as the CMBS market was swept up by the carnage in the broader credit market.
The amount of Ginnie Mae-held loans rolling from 60 days to 90 days delinquent slowed in the second quarter, after spiking last year. According to research from Credit Suisse, this could signal slower involuntary prepayments going forward.
The Ginnie Mae share of agency fixed-rate issuance dropped to 33% in August, from 36% in July. Its total 30-year gross and net issuances in August were $28.8 billion and $22.7 billion respectively, both down from $31.4 billion and $15.2 billion in July.
Credit Suisse analysts believe Ginnie will continue to depress its share of agency fixed-rate issuance because of higher prepays and the Federal Housing Administration annual premium hikes that begin in October.
Ginnie Mae prepayment speeds increased 10% in August but should begin to slow in November.
"Our November projections factor in the likely impact of an increase in the FHA upfront premium on prepay speeds based on a reduction in refi incentives," according to the report.
But some front-loading refinancing is occurring ahead of the premium increases, and "more dampening in prepay speeds than projected could occur starting in November."
Write to Jon Prior.
